Do home warranty programs pay off?
By Michele Lerner • Bankrate.com
http://www.bankrate.com/finance/real-estate/do-home-warranty-programs-pay-off-1.aspx
· Home warranties cover appliances, heating and air conditioning.
· Some question whether policies are worthwhile.
· Proponents say policies offer peace of mind to homeowners.
When your 20-year-old refrigerator springs a leak, what do you do? Your first instinct may be to decide between a costly repair and an even costlier replacement.
But if you have a home warranty policy, a repair could be free.
Home warranty policies are a perk of many home purchases. They cover repairs on specific home elements, such as built-in appliances, heating and air conditioning systems, and plumbing.
"A home warranty contract promises to keep working items working for a certain time period, usually one year," says Carl Knighten, CEO of HMS Tri-Region, a 30-year-old home warranty company based in Fairfax, Va.
Learn the details
Two types of home warranties are available:
· Homebuilder warranties on newly built homes. The cost of the warranty is included in the price of the home. Builder warranty policies typically cover up to 10 years of structural defects; one year of coverage on items such as stucco, drywall and paint; and two years of coverage on HVAC, plumbing and electrical systems. Appliances are typically covered for about six months.
· Home warranty company polices for existing homes. Companies also sell policies to purchasers of existing homes. In most cases, a home seller pays for these policies -- which typically cost a few hundred dollars -- as part of the sale of the home. These policies usually cover one year of repairs on various appliances in the home, along with its furnace, air conditioning and plumbing.
Many home warranty policies have a deductible of around $100 or the cost of a repair, whichever is less. The deductible applies to each repair that occurs.
Home warranty policies also are available directly to homeowners and homebuyers, who may purchase them in certain circumstances -- such as after buying a foreclosure, Knighten says.
